In his first ever State of the Union address, President Donald Trump called upon members of Congress to "set aside our differences, to seek out common ground, and to summon the unity we need to deliver for the people."
If the president really wants to strike a note of bipartisanship in his State of the Union address — following up on this declaration for bipartisanship — and build on the recent spurt in economic growth that he rightly takes some credit for, Mr. Trump should lend his unequivocal support to a House bill, one that has widespread support across party lines,
H.R. 1585, the "Fair Investment Opportunities for Professional Experts Act" sponsored by Rep. David Schweikert, R-Ariz., passed the U.S. House of Representatives unanimously on Nov 1, 2017. Yet for some reason it's languishing in the U.S. Senate.
This bill liberalizes the definition of "accredited investor" to allow non-wealthy but knowledgeable investors to invest in startups free of red tape. As I testified in July before the before the Capital Markets subcommittee of the U.S. House Financial Serivces Committee, despite the impressive recent performance of the U.S. stock market, "financial opportunities are being snapped up by the 'accredited investor' class that has the freedom to buy shares in companies that aren’t weighed down with . . . mandates" such as the costly regulations of Sarbanes-Oxley and Dodd-Frank.
Since the Sarbanes-Oxley Act was signed into law by President George W. Bush in 2002, many public companies have seen auditing costs quadruple as a result of the law, and these costs have soared even further with the regulations from the Dodd-Frank "financial reform" law rammed through a Democratically-controlled Congress and signed by President Obama in 2010.
There has been a steady decline in the number of initial public offerings (IPOs) per year, and the average size of IPOs has also dramatically increased. These trends make it more difficult for entrepreneurs to raise money, but as I testified, "it is middle-class investors who have been most harmed by being almost totally shut out of this early stage of growth of America’s fastest growing companies."
Fortunately, members of both parties recognize the problem and are offering meaningful, if incremental, solutions. There are bills to build on the success of the Jumpstart Our Business Startup (JOBS) Act, a bipartisan deregulatory investment law signed by president Obama. H.R. 1585 is most prominent among them.
H.R. 1585 would allow non-wealthy Americans who have proven their investing competence, such as licensed brokers and investment advisers, to participate in private offerings free of most of the red tape from Sarbanes-Oxley, Dodd-Frank, and other securities laws. Under Regulation D, which the Securities and Exchange Commission promulgated in 1982, these "accredited investors" have been strictly defined as those who have at least $1 million in assets other than their principal residence, or who have made $200,000 per year for three of the last five years.
Now, if this bill is passed, some non-wealthy investors could join the "accredited" club for the first time. That’s why the Senate needs to get moving and pass this measure as well. But so far, a companion version of this bill that was unanimously passed in the House hasn’t even been introduced in the upper chamber.
So following up on the State of the Union address, President Trump should use a bully pulpit address to push for a law that would lessen the bullying done by securities laws directed at ordinary investors and entrepreneurs.
John Berlau is a senior fellow at the Competitive Enterprise Institute. He is the author of the book "Eco-Freaks." Read more reports from John Berlau — Click Here Now.
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